DAMASCUS - Lebanon's Banque Audi  has arranged a $380 million loan to French conglomerate Lafarge to finance a cement factory in Syria, which suffers from shortage of the product, a bank executive said on Monday.

The 18-month loan issued by a consortium of mostly Arab banks led by Banque Audi will be replaced upon maturity by a longer term loan, Bassel Hamwi, who runs Banque Audi's Syria operation told Reuters.

"This is a bridge loan that will allow the structuring of a longer term project finance. Demand for cement outstrips supply in Syria and Lafarge has competent local partners," Hamwi said.

Hamwi declined to reveal the interest rate but said the loan covers 60 percent of the cost of the 2.9 million tonne a year factory, which is due to start production in 2010.

Lafarge will own 80 percent of the factory. The rest will belong to the Syrian Tlas group, headed by the son of a former Syrian defence minister.

Syria recently opened up its cement sector to private investment after falling output from rundown government factories contributed to a housing crisis and lack of raw material for years.

Other investors are planning to set up cement factories in the country, including Gulf-owned Badia Cement, which this month offered 15 percent of its share for public subscription to finance a 3.2 million tonne a year factory.

The Syrian government is trying to attract international investors to compensate for four decades of nationalisation and economic mismanagement under the ruling Baath Party Baath, which took power in a coup in 1963.

A limited liberalisation of the economy started in the last few years. But U.S. sanctions imposed on Syria in 2004 for the government's support for anti-American groups in the Middle East have curbed Western investment in the country.

Banque Audi was among the first banks to set up in Syria after it allowed private banks five years ago. -Agencies